Trump’s attack on social cost of carbon could end up hurting his fossil fuel push

President Donald Trump’s efforts to boost fossil fuel extraction face a courtroom hurdle of his own making.

His March 28 executive order “promoting energy independence and economic growth” rescinded the Obama administration’s calculation of the “social cost of carbon” — a metric that had been central to the process of crafting and justifying government rules addressing human-driven climate change.

All government regulations are subject to cost/benefit analysis. The “social cost of carbon” was developed in large part to compare long-term costs from coastal flooding and other impacts of emissions of climate-warming carbon dioxide with upfront costs to the economy from curbing the burning of fossil fuels, the main source of such emissions.

The value at the end of the Obama presidency was set at roughly $40 for each ton of carbon dioxide, the main greenhouse gas emitted by human activities, or equivalent amounts of other gases such as methane. At that price, the benefits of Obama’s proposals to reduce emissions outweighed the economic costs.

The Trump order required a new calculation and ordered agencies to use procedures issued by the Office of Management and Budget in 2003 to craft relevant regulations.

A protracted delay in the Trump administration coming up with its own carbon-cost estimate could empower environmentalists pursuing legal challenges to mining, drilling or pipeline projects, said Richard Revesz, director of the Institute for Policy Integrity at New York University School of Law.

In an email on Tuesday, he pointed to two recent court decisions. On Tuesday, a three-judge panel of the United States Court of Appeals for the District of Columbia ruled that the Federal Energy Regulatory Commission, or FERC, must consider the impact of greenhouse gas emissions that will result from construction of three new interstate pipelines in the Southeast. The Sierra Club, other environmental groups and some affected landowners had challenged the commission’s environmental review of the project.

“In the ruling, the judges held that FERC ‘must either quantify and consider the project’s downstream carbon emissions or explain in more detail why it cannot do so,’” Revesz said, adding: “The court further explained that FERC should either use the social cost of carbon to monetize the climate effects associated with those emissions or explain why it chooses not to do so.”

Just last week, another federal court decision blocked a proposed coal mine expansion in Montana in part over the government’s failure to assess the environmental impact of burning additional coal. (Nearly all of the coal from that mine has been exported to Asia or Europe of late, according to court documents).

In that ruling, U.S. District Court Judge Donald W. Molloy of Montana pointed to the government’s failure to use the existing calculations for the social costs of carbon, arguing that government officials “could, and should, have tied its greenhouse gas emissions calculation to the effects of those emissions.’’ The decision, Judge Molloy wrote, was arbitrary and capricious because officials quantified the benefits of expanded mining “while failing to account for the costs, even though a tool was available to do so.’’

The lawsuit about the Montana coal mine was filed in 2015, but expansion of western coal mining and exports has been a signature aspect of the Trump agenda. Similar mining plans have eventually gotten court approval, but only after officials submitted estimates of the environmental and climate impacts.

“These rulings show how President Trump’s executive order withdrawing support for the social cost of carbon is misguided and shortsighted,” said Revesz. “As these recent rulings show, agencies will lose legal challenges when they don’t appropriately consider climate change impacts. Rather than speeding the process of infrastructure and energy development, the Trump administration has risked slowing it down.”

There are several elements that go into the social cost of carbon about which we’re uncertain. But it’s specious to imply that the best response to that uncertainty is to do nothing.

Michael Greenstone, University of Chicago

In June, Jim Laity, a career Office of Management and Budget employee who runs the environmental branch of the Office of Information and Regulatory Affairs, signaled that work to revise the carbon calculation was under way. During an online presentation at a public workshop on the social cost of carbon at the National Academy of Sciences, he said relevant agencies were “actively working on thinking about the guidance, ” according to Greenwire. Asked what has changed since then, a spokesman for OMB, Jacob A. Wood, said in an email on Wednesday that the Trump administration “is still considering how to implement” the portion of the executive order on the social cost of carbon. “As of right now, there is no other update,” he wrote.

Laity’s presentation in June did hint at a much lower cost of carbon to come, noting the significance of Trump’s reference to the 2003 Office of Management and Budget guidance for writing regulations. (Here’s the webinar recording.) “[I]t says pretty unequivocally that the main focus … should be costs and benefits that accrue to citizens and residents of the United States,” Laity said. “After that it says if a regulation does have significant impacts outside the United States that are important to consider in the regulation for some reason then they should be clearly segregated out and they should be reported separately.”

Under the previous administration’s process, he said, “That wasn’t what we were doing.”

The Obama-era cost of carbon included costs of impacts outside the U.S. — with more than $30 of that $40 a ton coming from projected climate change impacts abroad, according to several economists who have studied the process.

As OMB proceeds with its review, it will have plenty of input from groups affiliated with industry, including the Institute for Energy Research. In an email on Wednesday, Robert P. Murphy, a senior economist for the group, said: “We appreciate that agencies are in an awkward position right now, but our view is that the correct decision is to avoid using such a dubious concept as the ‘social cost of carbon’ in its present form.”

He said the calculations mask enormous value judgements, arguing that the resulting dollar value has little to do with science and much to do with an administration’s view of the world. “Even if we agreed on a particular computer simulation of the monetary damages accruing from climate change over the next few centuries, the calculation of the 'social cost of carbon' would vary widely, depending on our choice of parameters that have nothing to do with climate science,” he said.

In that, Murphy’s sentiments reflect those of some analysts whose views on climate are at odds with the Trump administration. David Roberts, now writing on climate and energy at Vox, wrote a much-cited column for Grist a few years ago dissecting economic calculations used to determine how much it is worth today to limit climate-related harms generations in the future. He warned, “They are social and ethical disputes being waged under cover of math, as though they are nothing but technical matters to be determined by ‘experts.’”

There’s really no legally defensible stance for having no social cost of carbon, said Michael Greenstone, a University of Chicago economist who in 2009 co-led the Obama administration working group that updated federal carbon-cost calculations. That group was disbanded under Trump’s March order.

In a phone interview on Wednesday, Greenstone said, “There are several elements that go into the social cost of carbon about which we’re uncertain. But it’s specious to imply that the best response to that uncertainty is to do nothing.”

Interviews earlier this year with a range of economists and policy analysts suggested that the Trump administration would end up setting a very low cost of carbon, perhaps $5 a ton, but not reject the metric entirely. This would be consistent with an influential federal appeals court ruling late in 2007, which found that the administration of George W. Bush improperly ignored costs from global warming in setting gas-mileage standards for sport utility vehicles and small trucks.

“[W]hile the record shows that there is a range of values, the value of carbon emissions reduction is certainly not zero,” the ruling said.